December 5, 2017 / 10:31 AM / 10 months ago

UPDATE 3-Toll Brothers profit misses on lower-than-estimated home prices

* Sees 2018 adj gross margin 23.75-24.25 pct vs 24.80 pct in 2017

* Q4 orders up 14.5 pct, its slowest pace in 6 qtrs

* Shares down 8 pct at $3.93 (Adds background, analyst comment; Updates share price)

By Arunima Banerjee

Dec 5 (Reuters) - U.S. luxury homebuilder Toll Brothers Inc's quarterly profit and revenue missed analysts' expectations on Tuesday as it sold homes at prices lower than its own estimates, sending the company's shares down 8 percent in morning trading.

The company said it also expects a decline in its full-year adjusted gross margin.

A robust job market has supported demand for housing in the United States, but homebuilders are not fully able to take advantage of the rise in demand due to supply constraints such as higher labor and raw material costs.

The company, which mainly builds single-family homes, expects fiscal 2018 adjusted gross margin of between 23.75 percent and 24.25 percent, compared with 24.80 percent this year.

The homebuilder, which typically sells luxury homes that can cost upwards of $1 million, earlier this year introduced a new line of homes with lower prices and quicker delivery times to cater to millennials who are starting families.

The move has boosted demand but has also weighed on the company's average prices, that rose marginally in the fourth quarter following declines for three straight quarters.

Toll Brothers, which has been building homes for half a century, forecast full-year revenue of between $6.24 billion and $7.48 billion, compared with $5.81 billion this year.

Orders, a key metric of future revenue for homebuilders, rose 14.5 percent to 1,979 homes in the three months ended Oct. 31, its slowest pace in six quarters.

Toll Brothers' average price of homes sold increased to $836,600 in the quarter from a year earlier, missing its own forecast, while the number of homes sold rose 9 percent to 2,424.

Homebuilders have reported largely positive quarterly results and remained upbeat on the housing market even as the hurricanes weighed on some operations.

Toll has not given any details yet, but MKM Partners analyst Megan McGrath expects the hurricanes to weigh on the homebuilder.

The company's net income rose to $191.9 million, or $1.17 per share, in the quarter, from $114.4 million, or 67 cents per share, a year earlier. The year-ago quarter was hit by a $121.2 million warranty charge.

Revenue rose 9.3 percent to $2.03 billion.

Analysts on average had expected a profit of $1.19 per share and revenue of $2.08 billion, according to Thomson Reuters I/B/E/S.

Up to Monday's close, the company's shares had risen 63.4 percent this year. (Reporting by Arunima Banerjee in Bengaluru; Editing by Saumyadeb Chakrabarty and Shounak Dasgupta)

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